Long term funding is the backbone of modern lifestyle. Gone are the days when people lived to save and buy home just before the retirement. The average household borrowing in the UK (United Kingdom) is rising year on year and Britons are saving less every month. Indeed British Graduates are second most indebted students in the world.
As you begin your new job, you already owe staggering student debt along with a couple of personal loans and credit card bills. Thus planning for long term loans is not a cakewalk in the UK. Whether you dream to own a home or start a new business you need to be eligible for high ticket loans.
With high debt to income ration, for long term loans no guarantor would come to your help. Every time an individual signs as a loan guarantor they risk their own credit report with you. As a guarantor they sign the guarantee for repayment of the loan. In case the main borrower fails to make repayment on time, the guarantor becomes liable for repayment. Thus it is not always feasible to search for loan guarantor with poor credit rating.
You must instead build your credit report to stay eligible for long term loans. Student loans are exorbitant these days and thus it is advisable to begin repaying a part of student loan every year. Based on your long term financial goals, you must plan the repayments. It is important to make a 5 year or maximum 10 year plan for repayment of student loan.
Repaying student loan, you would become eligible for low cost mortgage. You can also consider refinancing your student debt by contacting a loan broker online. Using the expertise of a professional loan advisor you can get introduced to low interest loans for long term. They can help you find consolidation loan- either secured or unsecured, as per your repayment capacity.
Things to consider before applying for long term loans
- Improve your credit rating
Before you apply for long term loans it is important to work on your credit report. Right from the number of loans you owe to your credit bill balance, to your repayment history, to your credit utilisation ratio and loan queries all types of financial movements affect your credit score. Thus it is important to work on your credit rating before you apply for loan. A good credit score is a gateway to better rate of interest. Indeed you can save on the overall cost of the loan with the help of better credit rating.
By repaying your student loans on time and reducing the overall debt to income ratio, you can gradually improve your score. Unlike main street lenders you can find better deals online.
- Use professional loan assistance
Long term loans call for long term responsibility. It is thus important to compare and choose the most affordable deal. While main street lenders usually tighten reins to extend loans to borrowers with low credit score, you can find tailored loans online from private players. There is a host of licensed loan providers who exclusively work with bad credit borrowers. They let you compare and choose the best deal.
- Look for ease of payment
Always choose ease of payment before signing a deal. You must evaluate your repayment capacity and apply for loan with affordable instalment plan. A lot of borrowers opt for high instalment loans to keep the overall cost of loan low. However with long term loans, it is important to choose modest repayment plans. A single delay can deter your report as much as multiple delays. It indeed is advisable to set automated repayments from your bank account.
Also, with ease of repayment, small cash hassles or temporary crunches do not hurt your financials.
- Have a back up for loan repayment
Emergencies knock you unannounced. You must always build a back-up plan for timely repayment of loan. While you may never use that back up, but having a second source to fund the payment helps you live with peace of mind.
It is one of the smartest ways to build a reserve fund for your loan and ease off stress of loan repayment. Over the course of time, you can save enough amount to fund the prepayment. A small but consistent contribution can be enough to support your loan. You can use this amount to prepay or pay your loan during emergency.
- Keep your stress under check
High ticket loans such as home loan, debt consolidation loan or homeowner loan are borrowed for long term. It thus requires a lot of perseverance and self discipline to make that loan a success. You must always keep your stress under check when open a big loan. All days are not same and so could be your financial health. It is important to have a balance between your savings, investments and borrowings.
- Stay away from credit bills
When you raise a long term loan, you literally exhaust your credit limit and no longer remain eligible for further funds. Herein it is important to keep a tab on your credit card bills. By rolling over balance every month, you can bleed your report. The best advice is to limit the use of credit cards and pay bills on time.
- Adopt healthy financial habits
Good financial habits help you stay afloat in the long run. As you pay your credit bills and loan repayments on time you would build good history. Likewise you must also follow a predefined budget. This ensures positive cash flow all the time.
You must never indulge in unplanned expenses and work on maintaining a decent ratio between your income and expenses. In the months when your expenses rise, you must save more and compensate. The good financial habits are not for a day or two; these should indeed become a part of your life.
The success of a long term loan thus depends on your personal willpower. Whether you need a loan to build your assets or to manage your past debts, all these tips would come handy. You can always contact a regulated loan advisor to make an informed decision with more confidence and zeal.